Washington Archive

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ALEXANDRIA, Va. (7/21/11)--A proposed rule relating to credit union service organizations, corporate credit union-related accounting issues, stabilization fund borrowing, and reviewing the 2011 operating budget are on today’s National Credit Union Administration (NCUA) board meeting agenda, as is an interim final rule addressing remittance transfers. Discussion of a final rule that revises "net worth" for natural person credit unions and the "equity ratio" for the National Credit Union Share Insurance Fund (NCUSIF) will not be on the agenda of today’s NCUA open board meeting, which is scheduled to begin at 10:00 a.m. ET. The Credit Union National Association (CUNA) had supported some of the proposed revisions, which were proposed at NCUA’s March open meeting. Among the provisions CUNA supported in its comment letter to NCUA filed in May were amendments to allow NCUA's Section 208 Assistance made to troubled credit unions to qualify as regulatory net worth. CUNA also supported a key change to the NCUSIF’s “equity ratio” definition to clarify that the NCUSIF equity ratio must be based solely on the financial statements of the NCUSIF without consolidation with other statements, such as those of conserved credit unions or the Central Liquidity Facility. CUNA strongly opposed a provision that would have added language to the definition of a credit union’s net worth to require “bargain purchase gain” be deducted from a target credit unions net worth when it is merged with another credit union. CUNA was concerned that the proposal would result in a decrease in the combined credit union’s net worth. CUNA recently wrote the agency to urge deletion of the proposal or to seek further comments from the credit union system before proceeding on that provision. The agency will also discuss combining the roles of deputy executive director and chief operating officer into a single position, and the monthly insurance fund report will be presented. For the full agenda, use the resource link.

WASHINGTON (7/21/11)--With the one-year anniversary of Dodd-Frank Wall Street Reform Act enactment coming today, the Credit Union National Association notes that its priority over the past year, and into the future, remains limiting the impact of related regulations on credit unions. A number of Dodd-Frank provisions also become effective today. The largest Dodd-Frank issue for credit unions, and CUNA, is the Federal Reserve’s debit interchange fee cap. While credit union input ultimately helped lessen the impact of the Fed’s final rule for both larger and smaller institutions by altering the rule, CUNA continues to encourage Congress to keep a watchful eye on the implementation process. CUNA is pressing the networks to ensure a two-tiered system is provided that will allow small issuers such as most credit unions to obtain more debit fee income than will be permitted for large issuers under the Fed’s final rule. CUNA is also planning to work with the Fed as it monitors the impact of the interchange rule on credit unions and other institutions. Title XIV of the Act, which addresses mortgage regulations, is another point of emphasis for credit unions and CUNA. Portions of this title that cover mortgage servicing and some mortgage appraisal activities are currently effective. Many other mortgage-related changes, including changes to disclosure requirements, underwriting standards, and new high-cost mortgage standards are set to become effective in the future. These rules have staggered effective dates. More pressing for credit unions are portions of the Dodd-Frank Act that come into effect today. As of today:

* The limit on next-day availability for deposited checks will increase to $200. The previous limit was $100. * The Truth in Lending Act and Consumer Leasing Act will also apply to consumer credit transactions and consumer leases of up to $50,000. This $50,000 cap will increase to $50,800 on January 1, and can be adjusted further in the future. The previous cap was $25,000.

While the official compliance date for credit score notice changes is listed as July 21, the changes were not published until July 15, so by law they cannot become effective until August 15. Still, CUNA has recommended that credit unions begin complying with these changes, which require additional information to be provided on risk based pricing and adverse action notices that are released to credit union members. For more on these changes, use the resource link to access CUNA’s Compliance Blog. The Consumer Financial Protection Bureau also officially begins its work today. The agency begins its work without a leader, and amid congressional threats to its future funding. Still, it is intact, and will take on oversight of the Equal Credit Opportunity Act and the Fair Credit Reporting Act, as well as regulations addressing electronic fund transfers, mortgage originator registration, and mortgage assistance relief services, today. Authority over 47 separate financial rules is being transferred to the CFPB from the National Credit Union Administration, the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Trade Commission, and the U.S. Department of Housing and Urban Development. CFPB representatives have said that the agency is "committed to remaining attentive" to the concerns of credit unions and will work to address the concerns of credit unions and other small issuers as it develops and amends regulations. CUNA earlier this month called on the CFPB to consider the differences between member-owned financial cooperatives such as credit unions and for-profit banks that put the interests of their shareholders first as it continues with its work.

WASHINGTON (7/21/11)--A Consumer Financial Protection Bureau study has found some discrepancies between the credit scores that are provided to consumers and the scores that lenders and other businesses sometimes use to judge a consumer’s creditworthiness. The CFPB in its study noted that while many consumers may believe that the score provided to them via a free yearly credit report or a paid-for credit score service is their only credit score, a range of credit scores, from a variety of sources, are available. While some of these scores are used by both consumers and lenders, many of the scores used by lenders to determine creditworthiness are never disclosed to consumers. Potentially inaccurate credit scores could cause consumers to apply for loans they are not qualified for, which could result in the payment of pointless application fees and a lowering of their credit score. Inaccurate scores could also result in consumers that have underestimated their own creditworthiness accepting poor loan terms. The agency is planning to “quantify the differences between the credit scores available to consumers and those used by creditors” in a follow up study. That pending study will also provide more details on how discrepancies in credit scores can harm consumers. Consumers that are rejected for loans or other financial products will as of July 21 have free access to the credit score that was used to make the decision. (See related story: Rejected consumers now can access free credit scores) For the CFPB study, use the resource link.

WASHINGTON (7/21/11)--A bill intended to bring more transparency to the Federal Deposit Insurance Corp.’s (FDIC) bank closure procedures was approved Wednesday by voice vote by the House Financial Services Committee. “Bank failures have hit states all across the country, posing a serious problem that’s negatively affecting our communities and stifling economic growth,” said the bill’s chief sponsor, Rep. Lynn Westmoreland (R-Ga.), in a release that also noted there were 140 bank failures in 2009 and 157 in 2010. Comparatively, 28 federally insured credit unions failed both in 2010 and 2009. Of the bank failures Westmoreland said, “We need to figure out exactly what is causing such a high number of banks across the country to fail. My bill (H.R. 2056) starts that process with an audit of the FDIC’s policies and procedures, including controversial practices like paper losses and loss-share agreements.” The committee release also said banks suffer from a regulatory “mixed messages problem,” where examiners fail to adhere to a regulator’s guidance. Westmoreland’s bill also would: * Facilitate coordination between the Inspector Generals of the FDIC, Federal Reserve, and the U.S. Treasury Department; * Require the FDIC Inspector General to submit the results of the required study and any recommendations to Congress within a year of enactment; and * Request that the Government Accountability Office, the investigative arm of the U.S. Congress, study the causes of high levels of bank failures and the “counter cyclical impact of fair value accounting standards” Westmoreland also noted that Georgia has been particularly hard hit with bank failures, with 67 closures since 2008. He added that local businesses are struggling with a resultant shortage of credit. The Credit Union National Association (CUNA) backs an increase in credit union member business lending (MBL) as a means to help small businesses access as much as $13 billion in new credit and add 140,000 new jobs to the economy—all at no cost to taxpayers. Legislation is pending in both the House and Senate to increase the MBL cap to 27.5% of total assets, up from the current 12.25%. The committee also voted on the following bills: